Correlation Between MFA Financial and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both MFA Financial and AG Mortgage at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MFA Financial and AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and AG Mortgage Investment, you can compare the effects of market volatilities on MFA Financial and AG Mortgage and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MFA Financial with a short position of AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and AG Mortgage.
Diversification Opportunities for MFA Financial and AG Mortgage
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MFA and MITT-PB is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment and MFA Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MFA Financial are associated (or correlated) with AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of MFA Financial i.e., MFA Financial and AG Mortgage go up and down completely randomly.
Pair Corralation between MFA Financial and AG Mortgage
Assuming the 90 days trading horizon MFA Financial is expected to generate 2.19 times less return on investment than AG Mortgage. But when comparing it to its historical volatility, MFA Financial is 1.23 times less risky than AG Mortgage. It trades about 0.09 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,037 in AG Mortgage Investment on August 23, 2024 and sell it today you would earn a total of 201.00 from holding AG Mortgage Investment or generate 9.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFA Financial vs. AG Mortgage Investment
Performance |
| Timeline |
| MFA Financial |
| AG Mortgage Investment |
MFA Financial and AG Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and AG Mortgage
The main advantage of trading using opposite MFA Financial and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, AG Mortgage can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AG Mortgage will offset losses from the drop in AG Mortgage's long position.| MFA Financial vs. Two Harbors Investment | MFA Financial vs. Invesco Mortgage Capital | MFA Financial vs. Chimera Investment | MFA Financial vs. Chimera Investment |
| AG Mortgage vs. Cherry Hill Mortgage | AG Mortgage vs. Chimera Investment | AG Mortgage vs. PennyMac Mortgage Investment | AG Mortgage vs. Lument Finance Trust |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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